Non-fungible tokens (NFT) are usually associated with strange artworks and high auction prices. Critics call NFT a bubble. But the basic technology behind NFT and its explosive use cases show that the booming economy, the changing game landscape, new fashions and collectibles, and the evolutionary path of personal expression may help attract 1 billion users into the meta-universe.
Looking for killer apps to accelerate NFT adoption
Non-homogeneous tokens (NFT) are definitely a bubble. People have invested hundreds of millions of dollars in NFT. Most of these “investments” will plummet to zero, which is very scary.
At the same time, NFT will change the world. They will stimulate huge new economic growth, be included in the virtual “Metaverse”, and become the new norm of ownership.
These two statements are not contradictory.
For many years, people have been looking forward to mainstream meta-universes (such as OASIS in “Ready Player One”). However, we seem to be still waiting for some “killer apps” to be widely adopted, which will push it into one billion households. There is e-mail on the Internet. Social media has Facebook. Many competing meta-universes that exist today seem to be looking for a viral advantage that will push them to dominate. Can NFT be that advantage?
What is NFT?
The answer requires some background knowledge. Treat non-homogeneous tokens (NFT) as a Crypto contract for asset ownership or performance tickets. Homogenization means actually identical and interchangeable, just like a dollar bill or an 8-foot 2×4 cedar board. Whether you own a dollar or a 2×4 cedar board, they all work the same.
Irreplaceability indicates that NFT is unique in at least some aspects, thus conveying the scarcity of related assets. As a Crypto token, NFT encodes and encrypts information related to assets, which may include data such as identity, ownership, asset history, and resale royalties.
Owners can “cast” NFT on platforms such as Mintable and OpenSea, and these platforms can also serve as NFT markets. Tokens are written into the blockchain, usually Ethereum, although smaller NFT-friendly blockchain technologies abound. The blockchain provides a secure, globally distributed ledger for these tokens, so that transactions can be tracked by the user’s blockchain address instead of the name, and privacy can be maintained if the owner wishes. Note that this kind of anonymity or pseudonym is usually valuable in metadata.
NFT based on Ethereum uses Ethereum’s ERC-721 open standard. These tokens are truly unique; there will always be only one asset associated with each. In contrast, ERC-20 tokens are fungible, although the supply is usually limited. (Think about concert tickets, although ERC-20 tokens can also be used for exchangeable vouchers, governance shares, or social community building, such as the $RAC tokens of music artist RAC.) In both cases, scarcity Both are a key value driver, but this is especially true for NFTs.
Based on in-game transactions of skins, dances, weapons, etc., games such as Overwatch and World of Warcraft have developed huge economies, but purchases are still locked in the app. Now, games and other platforms are beginning to convert such purchases into NFTs. Public blockchains provide the promise of security, authenticity, and mobility across other applications using the same blockchain—provided that the developer allows it.
The story of computing is often one of how new technologies can help break down the barriers between people, resources, and data silos. NFT will bring a new wave of data portability and a bridge between complementary applications.
In this context, let’s look at some major examples of what people can already do with NFTs today, remember that the technology is only 9 years old. This is just the beginning.
NFT as a visual art
“NFT liberated art. Traditional art has time and space. You have to be in the right city, go to a museum, be invited to someone’s home, etc. Anyone, anywhere, as long as there is an Internet connection, can view NFT And receive them. This is a huge breakthrough.” — Cameron Winklevoss, entrepreneur and co-founder of Gemini Exchange.
Starting with the launch of CryptoPunks in June 2017, visual arts and CryptoKitties have brought NFT into the mainstream consciousness. CryptoPunks contains 10,000 unique 24×24 pixel art avatars. CryptoPunks was initially provided to the Ethereum community for free and helped inspire ERC-721 token technology.
Soon after the release of the CryptoPunks series, the secondary resale market was born. According to creator Larva Labs, “The total value of CryptoPunks sold last year was 199,519.76 ETH (approximately US$404,723,844.09).” The largest CryptoPunks auction to date was #7804 in March 2021, with a transaction price of US$7.57 million. CryptoPunks are often seen as a symbol of community and/or status, which may explain that rapper Jay-Z might buy #6095 for approximately $119,000.
Unsurprisingly, similar projects followed (including Larva Labs’ 3D Meebits), and many works linked certain capabilities or benefits to ownership. For example, Bored Ape Yacht Club allows owners to access a shared Crypto graffiti area. The initial BAYC token sales were all 0.08 ETH, but now the average resale is about 1.6 ETH. Or consider Reddit CryptoSnoos, which is similar to a trading card and provides a community-specific way to stand out, express group support, and showcase some personal talent. This NFT art means, “I am the same as you… but I am unique.”
NFT contains smart contracts, which is a technology that performs a set of operations under given conditions. In other words, if one thing happens, then another thing will be executed. The smart contract function is the core of NFT’s use in visual arts, because it provides artists with a new income channel, and they usually lose most of their income to intermediaries and resales. Through the NFT smart contract, the artist can directly sell a piece of work to the buyer (the irreplaceability confirmed by the blockchain ensures that the buyer has a unique ownership) and obtain the proportion of royalties for all subsequent resales. If the NFT changes ownership, then X% of the transaction will go to the artist’s blockchain wallet. Smart contracts automatically handle these operations, and no one in the middle participates or introduces delays.
Artwork is usually sold through markets such as Foundation.app, although high-profile works may be sold through traditional auctioneers, as evidenced by Beeple’s record-breaking $69.3 million NFT auction at Christie’s in March 2021. All in all, CryptoArt data shows that to date, more than 700,000 NFT artworks have been sold for more than 300,000 ETH (currently more than $600 million).
NFT sales surged in the first quarter, and then fell back after the $69 million Beeple auction and subsequent cryptocurrency price adjustments. Negative news stated that “new data shows that NFT hype is fading.” A Reuters article in July quelled this opposition, noting that the NFT market “surged to new highs in the second quarter, with sales so far this year of US$2.5 billion, compared to only US$13.7 million in the first half of 2020. “OpenSea sold nearly $150 million in NFT in June alone. Reports of NFT deaths proved premature.
NFT in the game
The aforementioned CryptoKitties game made its debut on the Ethereum blockchain in 2017. The game is essentially a next-generation electronic pet game in the form of a cartoon cute NFT cat, and it has quickly become popular. In early December of the same year, the BBC reported that $4.5 million had been spent on NFT cats, which caused sufficient transaction traffic to slow the speed of the Ethereum blockchain. (Remember the demand for Layer 2 solutions?) In 2019, the CryptoKitties team announced the creation of a new blockchain called Flow, which has since attracted many NFT issuers.
One of the most popular NFT-driven games today is Axie Infinity, just like CryptoKitties meets Pokémon Go and completes the battle with monsters. The ERC-20-based Small Love Potion ($SLP) tokens in the game can be used as the currency for cultivating Axies and can be traded outside the game on global exchanges (such as Binance). Axie Infinity now has more than 40,000 active users every day, with a monthly NFT transaction volume of US$15 million and a market capitalization of US$2 billion. Partners include Ubisoft, Binance and Samsung. Axie Infinity players can earn hundreds of dollars a month through SLP agriculture, and the income earned through games may exceed the salaries of college graduates in developing countries. Inject NFT and blockchain technology into the game field, ready to open up a new line of online entertainment, and make money-making games a global phenomenon. Some people suspect that it will even replace the free-to-play game model that is very popular today.
90-day SLP/USD price chart. It is worth noting that the price drop in May coincided with the broader cryptocurrency market, and then as the game went viral, the price quickly tripled in early July.
From here, bringing gameplay into the meta-universe is just a small step. In addition to simple games, we can easily imagine that cross-platform technology can allow NFT-based characters or game items to appear in the virtual assets of Metaverse users. Want a new generation of boring apes to be your meta-universe steward? It may happen.
GameStop has invested at least some of the cash proceeds from its amazing, Reddit-driven startup, providing a new direction for the troubled company. Through the Gamestop NFT website, GameStop may send a signal that it will allow players to create, purchase and trade NFTs for game sequences, which may be very similar to NBA Top Shot. The details are still confidential, but GameStop’s move seems to be another sign of the growing value of tokenized entertainment.
Most importantly, Big Time Studios received $21 million in funding to develop a multiplayer action RPG called Big Time. Among them, players will be able to find and buy NFTs with realistic value. The idea behind Big Time comes from many of the largest game publishers in the industry. The game is expected to be launched on the Ethereum blockchain in 2022, although Binance’s NFT drop will begin in July 2021. Big Time will provide a patented off-chain custody system for its NFT, which will allow the export and import of NFTs from the game. This heralds our final game NFT-meet-metaverse thesis.
NFT in music and writing
From 2010 to 2015, as streaming services replaced broadcasting and pushed artists to pay, royalties on new music fell by more than two-thirds. Since then, the annual royalties paid have remained basically unchanged. Entering NFT, it now provides artists with the opportunity to directly connect with users and provide novel value in ways that traditional crowdfunding is impractical or impossible.
The Kings of Leon is the first band to release an NFT album with three token types, one of which provides the owner with a front row seat for lifelong live performances. The band cooperates with solution provider YellowHeart to manage Ethereum-based wallets and front-end sites for users. Maroon 5 and other companies have joined YellowHeart. Nevertheless, music lovers will soon face the problem of wallet spread when trying to organize and enjoy their NFT assets-and when someone will arrive with a Layer 3 “wallet in wallet” solution.
In February, Grimes combined her music and visual arts into an NFT on Nifty Gateway, and earned more than $5 million in revenue. Trance music pioneer Brian Transeau (“BT”) amplified this multimedia approach through his GENESIS.JSON project, which manually added more than 15,000 audio/visual elements to a 24-hour artwork. For more than 10 months, BT tried to combine music with coding and make NFT programmable. It was sold on SuperRare for 88.88 ETH (currently approximately $178,000). One can imagine that such projects are constantly displayed in the meta-universe for the public to appreciate or subdivide owners.
Of course, NFT can also be applied to writing. Quartz sold the first news article NFT. Twitter CEO Jack Dorsey sold his first tweet as an NFT for more than $2.9 million. (He then converted the proceeds into Bitcoin and donated the funds to African Relief.) But these one-time sales are not as attractive as Mirror and its $WRITE token, which uses its tokens for voting/governance and writer compensation. At the same time, every Mirror article is minted as an NFT related to tradable $ESSAY tokens. Readers buy $ESSAY with Ethereum currency (ETH) and thus own part of the article. Thanks to smart contracts, this allows any future income generated by the paper to be shared with $ESSAY holders, just like stock dividends. The Mirror project seems to be a tokenized form of Medium or Substack, and it carries an interesting promise to connect authors and readers and remove royalty slicing middlemen.
From prose, this is a small jump to books. Just as Amazon popularizes Crypto books through the Kindle platform, looking for NFT will be the next step in Crypto reading. Bookchain is one of the first services to help authors turn books into NFT. Publica is now doing the same thing, although not using the word “NFT” associated with the bubble. Like a musician, the author finds himself squeezed into a lower-income model by modern trends. NFT provides opportunities for anti-piracy resistance and new monetization opportunities, especially the residual income that continues to be obtained through the resale market. Imagine what a library in the Metaverse might look like.
The fun and collectability of NFT
Sometimes, NFTs embody key cultural moments, even if these moments are just silly and interesting. Selling Nyan Catmeme NFT 300 ETH (approximately $600,000) is a good example, like the sale of Charlie biting my finger video NFT for $761,000 and paying $473,000 for the original “disaster girl” photo, which shows a 4 year old Girl laughing mischievously in front of the burning house. If this makes people think that people will pay stupid money for stupid things related to pop culture, then… witness the involvement of billionaire Shark Tank investor and cryptocurrency enthusiast Mark Cuban himself with major NFT seller Rarible. An asking price of 9.2 ETH (approximately US$18,000) for NFT to unlock personalized videos from Cuba?
On the other hand, collectibility has always been about the perceived value and collective evaluation of social relevance and influence. Basketball plays an important role in many people’s lives, so it’s no surprise that NBA Top Shot, also created by Dapper Labs (the company behind CryptoKitties), has become one of the most well-known brands in NFT. Users purchase and trade video collections called “moments” as NFTs. By the end of May, the service had surpassed the one-million-user mark and accumulated more than 700 million U.S. dollars in sales in less than a year, most of which were NFT resales. Do not want to miss this journey, Major League Baseball is now ready to sell NFT on the Candy.com market.
NFTs based on popular culture are now everywhere. Marvel Comics is launching a series of NFT comics and collectibles with VeVe and a mobile app. Warner Bros. is selling a series of NFTs around the new Space Jam sequel, and no one will be surprised to see this become a regular part of future film releases. Not to be outdone, Anthony Hopkins’ new movie “Zero Touch” is being launched as an NFT on the Vuele platform, which is directly facing consumers. To avoid anyone thinking that souvenirs are only related to entertainment culture, don’t miss Tim Berners-Lee NFT’s sale of the original World Wide Web source code for $5.4 million.
Turning to be closer to the meta-universe, “Mars House” is a 3D rendering of a fantastic house located on Mars, implemented as NFT, provided by artist Krista Kim to adapt to the buyer’s own meta-universe environment. Part of the project is collectible art and part is architecture. NFT was sold on SuperRare for 288 ETH (over $500,000). This sale clarified that NFT belongs to the Metaverse, and people will pay high-value items to equip their virtual space.
To explore this further, please study NFT clothing. As people seek status and fashion for their virtual characters, especially when Crypto fashion crosses the physical world, NFT clothing is rapidly gaining popularity. Nike pioneered this concept with its 2019 CryptoKicks patent, which associates Crypto assets with a unique pair of physical sneakers. Or, RTFKT focuses on items compatible with Metaverse, such as Atari brand shoes. Please note that RTFKT offers a series of sneakers that are only available for CryptoPunks owners. RTFKT refers to the creation of physical clothing based on its Crypto design as “forging”. Obviously, how we present ourselves in the virtual world is as important as in real life.
NFT meets real estate
The idea that virtual land is valuable may be counterintuitive. After all, unlike physical land, you can make more virtual land with just a few mouse clicks, right?
Yes and no. The meta-universe is created according to rules, including how much “land” exists and where the land is in the world. In theory, people can change the rules and create more land for sale. In practice, this will violate users’ views on the scarcity of land, thereby affecting its value and possibly leading to the collapse of the real estate economy of the Metaverse. Part of the reason for the booming meta-universe economy is this scarcity, and investors are beginning to take notice.
In June, Republic Realm, a Crypto real estate investment company, paid more than $913,000 for a key plot in the Decentraland metaverse (sold as an NFT). This piece of land can be subdivided, and each piece can be sold or leased as its own NFT. Like real estate investment trusts (REITs) in the real world, Republic Realm is also preparing to provide investors with Crypto real estate funds, so people who cannot afford high-quality virtual real estate can still own some of these assets that can be traded. More and more people hope that video games can provide their own NFT-driven meta-universe. The Winklevoss twins and other cryptocurrency giants have invested heavily in virtual land in an Ethereum-based game/Metaverse called The Sandbox. In February, Axie Infinity’s nine land games were sold for $1.5 million. Minecraft fans can use the game currency to purchase NFT-based land on the Meta City server.
You may have noticed by now how much crossover between NFT departments is evolving. We mentioned earlier the artist Beeple, as well as the partial ownership and the idea of displaying NFT art in the Metaverse. All of this came together in December 2020, when MetaKovan and his Metapurse organization purchased the Beeple 20 series for $2.2 million. In order to show that art should be seen, not hidden, MetaKovan purchased land in three meta-universes-Decentraland, Cryptovoxels, and Somnium Space-to build museums on these spaces and to collect Beeple in each museum. Created an exhibition. He then went a step further and created B.20 tokens for art/land bundling and sold 10 million. In this way, every B.20 token holder can have partial ownership in art and larger projects. B.20 tokens can be traded on the open market like Ethereum and Bitcoin.
NFT real estate has also entered the physical realm. A powerful institution called SuperWorld has digitized the real world and mapped it onto approximately 65 billion buyable 100x100m plots, each of which can be (re)sold as an NFT. Owners can make anything they like in their plot and treat it as augmented reality. Most ordinary blocks (like your childhood home) sell for 0.1 ETH. A block on New York Avenue is currently listed for 1,000 ETH. Will another company show up and do the same thing? certainly. But SuperWorld is betting on early adoption and network effects, making it the de facto choice for the app market.
Even real estate in the physical world can now become an NFT. The first such transaction took place in Kiev in June of this year. The trick is to make the property have the ownership of the limited liability company. The purchase transfers the ownership of the LLC and is packaged as NFT property. This bypasses county-level records and other traditional land transfer methods.
Real estate may be just the beginning of NFT’s intrusion into traditional financial and investment fields. I look forward to seeing multiple ways of bridging NFT and decentralized finance (DeFi), such as NFTfi, where NFT can be used as collateral in the lending liquidity pool. Just as the high-profile NFT auction may herald the arrival of NFT auctions, so does NFTfi. In these two situations and countless others, as global access to NFTs and competition heat up, real-time trading performance will become more and more important. The network will face increasing pressure to maintain low-latency and congestion-free transactions.
Just the beginning
After all, we are still in the beginning stages of NFT and its use cases. IBM is working to convert its patents into NFTs to “help make it easier to sell, trade, commercialize, or otherwise monetize patents.” Scientists expect to sell the genomes of certain individuals as NFTs, even if only to raise funds. NFTs are increasingly playing a role in decentralized finance (DeFi), helping to manage lending. NFT can also help real-world inventory tracking and logistics.
Earlier, we said that NFT is a bubble. They are, just as Internet companies were the bubble of the late 90s. The bubble burst, and companies lacking basic value disappeared. Those who survived thrive, and some of them continue to shape our current world. Will Mark Cuban’s dancing NFT affect 2040? Highly skeptical. But will many NFT use cases continue to exist, develop, and shape the future structure of our Crypto world? Absolutely.
Going back to our original question about NFTs and meta-universes, we may first ask: Will NFTs stay, and will they become a big problem?
Yes, for the same reason, cryptocurrency and blockchain technology will gradually penetrate into our Crypto lives. Compared with the traditional predecessors, they are more efficient and effective in many, many roles. Think about the game NFT. If users can get more value, more practicality, more status, more portability and more fun from the in-game NFT than yesterday’s in-game tokens, why won’t NFT eventually take over? ?
If nothing else, this article and many of its examples should illustrate the rampant experiments that took place in NFTs, the value people find in them, and the fascinating ways in which NFTs are trying to start cross-pollination. If the benefits of these NFTs can be easily integrated into the consumer’s meta-universe life, why don’t users accept them? Once upon a time, it was very difficult to move communication between online services such as CompuServe and AOL. Today, standardized protocols solve this problem; we have universal SMTP/POP email. The same evolution will be staged in NFT and Metaverse. It will become easier to create, use, trade and transfer NFTs.
Among many other applications, NFT will increasingly provide people with a way to express individualism, which will be indispensable in the billions of online worlds. Perhaps in the infinitely vast virtual universe, NFT is a part of humanity that helps us maintain clarity and error.